Finished Goods and Cost of Goods Sold

Finished Goods Inventory

What are Finished Goods?

• Goods that are completed and ready to be sold.
• Merchandising companies call this Merchandise inventory.
• Beginning finished goods plus COGM is called Cost of goods available for sale.
• When goods are sold, the cost of producing those goods is expensed to the account Cost of goods sold

Example: Finished Goods Inventory

• Direct materials purchased: $60,000
• Direct materials, January 1: $30,000
• Direct materials, January 31: $24,000
• Direct labor used: $80,000
• Manufacturing overhead used: $45,000
• Work in process, January 1: $110,000
• Work in process, January 31: $80,000
• Finished goods, January 1: $90,000
• Finished goods, January 31: $50,000